By OLUSHOLA BELLO, Lagos
Investing in gold is an important part of a larger investment portfolio, as a form of diversifying one’s investment. Gold has held its value for hundreds of years and because of this, it is seen as a tangible asset into which investment can be stored and preserved for future generations.
Investment in gold often increases in value during difficult economic times and when there is a risk of higher inflation. This is because the value of gold is not usually correlated to the performance of other investments such as those connected to the performance of the stock market.
Gold is a precious metal which occur naturally as grains in rocks, and in alluvial deposits. It is a finite, unique and scarce natural element.
CEO of Greenville Capital Limited, Azeez Bello reports that over the past 20 years, the ground stock has only grown at a rate of 1.7 per cent. A total of 197,576 tonnes of gold exists above ground, as of 2019.
“The US Treasury is the largest known single holder of gold but only owns four per cent of all above-ground stocks. US Bullion Depository in Fort Knox holds approximately 147 million ounces of gold. Almost 50 per cent of above ground gold is in form of Jewellery while 21 per cent is owned by a large number of institutional and individual investors in the form of bars, coins and gold ETFs.
“Gold has served as a means of exchange, a store of value and unit of account for more than 3,000 years. Across the globe, it is also significantly utilised for investment and consumption. As a consumer good, the significant demand for gold jewellery is apparent in countries like India and China because it has roots in their cultural and religious beliefs,” he stated.
How To Invest In Gold
There are many ways to buy or invest in gold. Different products can be used to achieve a variety of investment objectives. Investors should consider the options available in their market, the form of investment that is appropriate to their circumstances, and the nature of professional advice they will require.
In general, investors looking to invest in gold directly have three choices: they can purchase the physical asset, they can purchase shares of a mutual or exchange-traded fund (ETF) that replicates the price of gold, or they can trade futures and options in the commodities market. Average investors, for example, might buy gold coins, while sophisticated investors implement strategies using options on gold futures.
According to Bello, investors can allocate capital to gold via different avenues. The most available structured gold derivative product in the capital market today, is the New Gold Exchange Traded Fund listed on the Nigerian Stock Exchange.
Value Of New Gold
The Net Asset Value of New Gold ETF was reported to have grown by over 900 per cent within year 2020. Where gold mining stocks are listed on the bourse, investors can also take position to benefit from such companies.
“Hitherto the gold market and business in Nigeria has been largely informal. However today, there are now opportunities for investors to purchase and sell physical gold bars, cubes, wires, sheets and coins through licensed commodity brokers. In the days ahead, gold is expected to be a tradeable commodity on all commodities exchanges in Nigeria,” he pointed out.